The legal tangle is preventing foreign direct investment in Bangladesh’s service sector for last one and a half years, industry people say, as a court stay order against licensing is still in effect.
After a writ petition against the Board of Investment (BoI) recommendation to issue licence to fully foreign-owned firms in service sector, the High Court delivered the order in October 2012 for three months.
The court directed different ministries, departments and regulators concerned to stop issuing licences to purely foreign firms.
Although the order was for three months, it has been extended several times, being in force for last 19 months.
“It is a great deterrent to FDI,” said a leader of Foreign Investors’ Chamber of Commerce and Industry (FICCI).
“Several foreign firms in service sector have already turned back because of this legal bar,” he added. A BoI official said they had received a number of foreign investment proposals in service sector but could not make any progress as licensing has to be stopped after the court order.
In his writ, the petitioner specially mentioned the names of logistics, shipping, airlines, distribution and travel agencies etc, the official said.
Mirza Walid Hossain, the petitioner, complained that the BoI was not following its own policy and recommending licence to foreign firms. According to him, the BoI in 2005 issued a directive discouraging 100% foreign-owned or joint venture companies in service sector like shipping, logistics, airlines, distribution and travel.
However, in 2008 the National Board of Revenue issued a circular allowing service sector firms fully owned by foreign investors to launch their operation in Bangladesh.
“It is really frustrating. I have learnt that we may need to yet more months to see a solution to the stalemate,” lamented a local investor who wished to launch a joint-venture shipping company.
For the sake of the country’s rapid economic development, investment is important from the private sector, he said.
Since the writ petition was filed against 15 high government officials, including Bangladesh Bank, National Board of Revenue and other public agencies, the government should take steps to resolve the matter immediately, the investor demanded.
A local agent of a foreign company alleged that he failed to renew his licence smoothly. “However, finally I got a temporary renewal of licence in line with the court order,” he said.